In a recent legal brief, a group of Dollar Thrifty Automotive Group shareholders accused management of lying to shareholders and agreeing to be bought by Hertz Global Holdings to repay a personal debt to its one of its bankers (Goldman Sachs Group).

[Previously, this post incorrectly stated that Avis had filed the legal brief]

Delaware Vice Chancellor Leo Strine doesn’t seem to be buying these arguments, according to the M&A law professor’s blog, which has been following today’s proceedings. “Things aren’t looking all that good for the plaintiffs so far. Vice Chancellor Strine is interested in hearing about improper motives and the plaintiffs really can’t come up with any. Strine is suggesting that if shareholders let [the Hertz] deal go, they could get nothing.”

At the heart of the the shareholder group’s argument is that the car renter was unfairly shut out of the bidding for Dollar Thrifty, which entered into an exclusive agreement to be bought by Hertz for no premium in a deal that grossly undervalued the rental car company.

To many observers, Hertz’s $39-a-share offer did look paltry, considering that the cost savings that the merger could achieve would be more than Hertz was bidding. The WSJ’s Heard on the Street said it had a “whiff of grand theft auto about it.”

And yet despite the shareholder group’s claims that Avis was shut out of the process, Avis in July did make an offer, $46.50 a share, for Dollar Thrifty, a 17% increase over Hertz’s bid. That price is fairly interesting because in the legal brief, which the shareholder group filed in support of its request for a preliminary injunction stopping the Hertz-Dollar deal, the shareholder group cites an estimate from a Goldman analyst that Dollar Thrifty was worth at least $47 a share.

Making Avis look even stingier–considering the argument that Dollar Thrifty’s board had failed in its duty to get the highest price it could in any sale—is the fact that Avis hasn’t agreed to a break-up fee if its deal with Dollar fails to clear antitrust scrutiny, something Dollar Thrifty asked it to do. Hertz agreed to a $50 million reverse break-up fee.

Of course, investors think both Avis and Hertz have submitted low-ball bids. Dollar shares are trading today at $48. This is despite the fact that Vice Chancellor Strine appears to be allowing the deal to go to Dollar shareholders for a vote on Sept. 16.

According to Peg Brickley at the Dow Jones Daily Bankruptcy Review reports, even Strine has had something of a tart tongue today, suggesting at one point that if Avis really wanted to win over Dollar Thrifty it would offer a reverse break-up fee. “So I am going to enjoin this deal so that Avis can be told something in crayon it obviously knows?’’ Strine asked.

Comments (4 of 4)

As you noted, DTG went from $ .65 per share 17 months ago and has traded in excess of $50 per share since then. When HTZ and CAR have not traded that low during the same period nor have they come anywhere near the $50 range,why has DTG's value increased so dramatically. Can you say....corporate buyback of shares!

3:30 pm August 26, 2010

JustSayin4141 wrote :

I'm just surprised that both the Avis shareholders AND the Hertz shareholders aren't up in arms over buying a company that is so OVER-VALUED, compared to themselves....
Per their declining business levels, HTZ and CAR are both down over 60% from their 2007 highs, and yet DTG (after being 65 CENTS 17 months ago) trades up at it's 2007 levels once again....

Do "Analysts" actually ~think~ any more??

8:41 am August 26, 2010

Woe is.. The OZ as time springs forward in the Spring of 2011 wrote :

The Yellow Brick Road... smelters are really starting to heat up on a Global Scale of Massive Debt Risk Aversion... "Where are the Jobs to fill all the Rental Cars, that have no renters?" Last question... "Will all the rental cars be Crysler's Mini Vans and USGM's Volts hauling 8 people in sharing the bed space at Fanny and Freddy at .20 cents on the .70 cent Us US Tax Payers Dollar?"

8:02 pm August 25, 2010

The Battle for America's Debt of Wealth... Heats Up in Wyoming... The OZ... wrote :

MC... excellent, "Grand Theift Auto... gone in a NY Nano-Oz Sceond"! You ain't gona' believe whats going to be leaked out of Jackson Hole by Thursday evening! Remember you heard (*IT) first right here in the Land Of OZ... "Follow the Yellow Brick Road"!

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